KCB Group is the only large lender, among the big six, to have publicly announced a rate cut effective this year compared to about 10 small and mid-sized banks.

Lending rates have, however, been on a downward trend since the second half of last year although they have lagged behind the dramatic fall in the inflation rate as well as the cost of funds as reflected in the Central Bank of Kenya’s policy rate.

On Monday, NIC Bank cut its base rate to 18 per cent from 19.5 per cent effective next month.

In 2011, the lender was ranked the 11th largest among the country’s 43 banks and the fifth largest in the mid-sized category in terms of market share.

Prime Bank, Fina Bank, Eco Bank, and I&M Bank are among those that have published advertisements showing that they will be effecting rate cuts between February 1 and February 15, while others have been communicating directly with their clients.

Kenya Bankers Association (KBA) chief executive officer Habil Olaka said that some lenders had moved quicker than others to lower their rates to gain competitive advantage, while others had adopted a more conservative approach.

“Currently, banks are lowering their loan rates and have done so consistently since June 2012, including banks that hold the largest market share in terms of loans and deposits.

"As recently as the beginning of January, some announced a base rate reduction while others did so in December,” said Mr Olaka.

KCB Group cut its base rate to 17 per cent from 19 per cent and its residential mortgage rate to 16 per cent from 18 per cent effective January 1, a week and a half before CBK announced a cut in its benchmark rate to 9.5 per cent from 11 per cent.

Banks ordinarily add a premium on their base lending rates, which means that their cost of loans is normally a few percentage points higher than the announced base rates.

In December, the average lending rate was 18.15 per cent, according to CBK data.

Inflation dropped 3.2 per cent in December, while the cost of funds for banks has been on a decrease to the current average of 6.8 per cent.

The last time Barclays Bank announced a rate cut was last September when it brought down its benchmark rate to 19.5 per cent.

Standard Chartered and CfC Stanbic Bank announced similar cuts in the same month, dropping their base rates to 18.5 and 19 per cent respectively, also effective in October.